London School of Economics and Political Science Hellenic Observatory Research Seminar

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London School of Economics and Political
ScienceHellenic Observatory Research Seminar

• Poverty and Social Policy in Greece Economic
  Modernization, Social Fissures and the
  Contradictions of Corporatism
• 6 December 2005
• Elias KikiliasEconomist, M.Sc, Ph.D.Researcher
  at the Institute of Social PolicyNational Center
  for Social Research

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• Issues
• Part I
• Work and Poverty in Greece, from a household
  perspective.
• Social policy efficiency in alleviating poverty.
• Part II
• Social policy as a bridge. The architecture of
  the bridge in the conservative-corporatist
  welfare regime.
• Familialism, corporatism and social reproduction
  in Modern Greece.
• Aspects of modernization The hidden labour
  market mobility.
• The origins of mobility from bureaucratic
  clientelism to the contemporary agrarian exodus.
• Social expenditure has been rising but a welfare
  state is lacking.

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• 1. Poverty and Work in Greece A Household
  Approach
• The Choice of Poverty Measure
• Although a large academic literature on the
  measurement of poverty discusses why the poverty
  rate is a poor summary index of poverty, all the
  same, it remains the most popular statistic. The
  problem gets serious when the poverty rate is
  used to draw policy conclusions or
  recommendations.
• Example
• When reductions in the poverty rate are used as
  the criterion for social policy efficiency,
  administrators who want to demonstrate success
  will always be tempted by the option of
  creaming the poverty population. By
  redistributing benefits or services away from the
  very poorest (who are so far below the poverty
  line they are likely to stay poor anyhow) to
  those just below the poverty line (who have the
  greatest chance of being moved over the line)
  administrators can improve the poverty rate, even
  while deepening the deprivation of the worst off
  - which is surely not a socially desirable
  outcome.

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• Employing the poverty rate as a measure of social
  policy efficiency, we get a clear answer to the
  question
• How many individuals are assisted by social
  expenditure in getting over the poverty
  threshold?
• But it is not sure at all that this is the right
  question.
• The SST Poverty Intensity Index
• This presentation - following the work of
  A.K.Sen, A.F.Shorrocks and mainly L.Osberg -
  introduces a measure of poverty intensity which
  is technically preferable to the poverty rate as
  a measure of poverty.
• The approach is (hopefully) one of simplicity,
  based on the hypothesis that one reason why bad
  measures of poverty continue to be used is
  because excess technique has been a barrier to
  widespread communication.

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• The Poverty Intensity index, hereafter SST, can
  be decomposed as
• SST (Rate) (Gap) (1G(x)), and transforming
  (1) into
• lnP(yz) ln(Rate) ln(Gap) ln(1G(x)), we
  get
• (3) ?lnP(yz) ?ln(Rate)?ln(Gap) ?ln(1G(x))
• That is, the percentage change of poverty
  intensity can be expressed as the sum of the
  percentage change in the Poverty Rate, the
  average poverty gap ratio (among the poor) and
  the Gini index of inequality in the poverty gap
  ratios (among the total population)

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• Data and Methods
• Data are based on the results of the survey on
  European Union Statistics on Income and Living
  Conditions (EU- SILC), carried out in 2003 by
  the National Statistical Service of Greece (ESYE)
  in collaboration with the Institute of Social
  Policy, National Centre for Social Research.
• Household's total disposable income total net
  monetary income received by the household,
  including all income from work (wages and
  salaries and self- employment earnings), private
  income from investment and property, plus all
  social cash transfers received including old-age
  pensions, net of any taxes and social
  contributions paid.
• The definition of the poverty risk used is the
  definition of Eurostat the percentage of
  persons, over the total population, with an
  equivalised disposable income below the at risk
  of poverty threshold.
• The at risk poverty threshold is set at 60 of
  the median of the national equivalised disposable
  income.

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• Poverty and Work Individual and Household
  approach
• In-work poverty implies that holding a job,
  though necessary, is not always sufficient to
  escape poverty.
• Work and poverty may be approached either by
  focusing on individuals or on households.
• An individual-based approach of in-work poverty
  focuses on issues such as job quality, low wages,
  precarious employment, inability to find
  full-time work etc.
• The household perspective is important because
  the household structure and the household work
  intensity affect the risk of the individual in
  being in poverty, beyond its personal and
  occupational characteristics.

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• Examples
• It is rather possible a female spouse holding a
  precarious job (part-time, low remunerated, etc.)
  not to be in poverty risk, if her husband holds a
  full-time average-paid job.
• Similarly, a young newcomer in the labour market,
  holding a low paid temporary job, may enjoy
  relatively high living standards if he lives with
  his parents.
• On the other hand, the members of a single-earner
  household may be in poverty risk, even if his job
  is of high quality and well-paid.
• The household approach allows focusing on the
  determinants of the families labour supply
  decisions.
• Estimation of poverty indicators is based on the
  notion of equivalised income, which means that
  the sum of household resources are allocated,
  through a certain equivalence scale, to all the
  members of the family. In other words, poverty
  estimations are implicitly founded on a household
  approach.

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Table 1 At-risk-of-poverty Rates Household
and Individual Approach, Greece, 2003
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Figure 1 At-risk-of-poverty Rates Household
and Individual Approach, Greece, 2003
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Table 2 Poverty Intensity Seniors and
Non-Seniors, Greece, 2003
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 Figure 2a Poverty Intensity Seniors and
Non-Seniors, Greece, 2003
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Figure 2b Poverty Intensity Seniors and
Non-Seniors, Greece, 2003
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Table 3 Poverty Intensity and Employment
Intensity in Households, Greece, 2003
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Figure 3 Poverty Intensity and Employment
Intensity in Households, Greece, 2003
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• 2. The Effectiveness of Social Policy
  Expenditure
• The central theme of this chapter is to what
  extent does welfare expenditure reduce income
  differences?
• A customary method to assess social policy
  efficiency is to compare poverty rates before and
  after redistribution, the so-called Beckermann
  ratios.
• To produce the Beckermann ratios we estimate
  three (3) income distributions
• Market Income, that is income before any
  transfers,
• Income including pensions, because pensions play
  a major role in social expenditure, and
• Disposable Income, that is the real income,
  including both pensions and other social
  transfers.
• The corresponding poverty rates are estimated
  using a single common poverty line based on the
  disposable income distribution, that is the real
  poverty threshold.
• It is important to note that this method,
  although practical, is no more than a simple
  exercise that should not be considered in
  interpretive terms.

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• It is also important to underline another
  implicit assumption comparing pre- and post-
  social expenditure poverty rates (or gaps) to
  measure policy efficiency, could imply - and is
  more than often interpreted in these terms even
  in academic or official documents - that the sole
  objective of social policy is income poverty
  reduction or alleviation. In this sense, it is
  related to the key policy issues of concerning
  the targeting and the allocation of resources.
• For policy makers, there is much appeal in the
  idea that the existing total of transfers can be
  reallocated to increase their effectiveness in
  combating poverty.

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• However, as A. Atkinson has put it, although
  politically fashionable, calls for better
  targeting need to be treated with extreme
  caution, because such recommendations tacitly
  assume that the sole objective of policy is the
  reduction of poverty, whereas a typical social
  protection programme has a multiplicity of
  objectives.
• In this sense, the constraints on policy choice
  are more complex than a fixed total budget,
  including the availability and reliability of
  information and the competence and adequacy of
  the administration, aspects all too often ignored
  by economists.

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Figure 5a The Effectiveness of Social
Expenditure, Total Population, Greece, 2003
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Table 5 The Effectiveness of Social Expenditure,
Seniors and Non-Seniors, Greece, 2003
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Figure 5b The Effectiveness of Social
Expenditure, Seniors and Non-Seniors, Greece, 2003
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Table 6 Participation of Pensioners in the
Population of Households, Greece, 2003
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Table 7 The Effectiveness of Social Expenditure,
Greece, 2003 Employment Intensity in Working-age
Households
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Figure 7 The Effectiveness of Social
Expenditure, Greece, 2003 Employment Intensity in
Working-age Households
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Table 9 Requisite Financial Resources for the
Alleviation of the Poverty Gap, Greece, 2003
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• Conclusions, so far
• Poverty risk is greater in non-working age
  households, but ¾ of the poor live in households
  with headlt65 years old, accounting for almost 80
  of the total poverty gap.
• Among working-age households - and the population
  as a whole - the larger part of the poverty
  volume stems from mixed employment families,
  that is multi-adult but single-earner households.
  
• Full employment (multi-adult and multi-earner)
  and workless households (no adult with market
  income), have an equivalent contribution to the
  poverty volume, but an important distinction
  should be highlighted poverty in full
  employment families stems mainly from the number
  of poor persons and to a lesser extent from the
  poverty gap, while the reverse is true for
  workless families.

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1. It must be emphasized that (a) poverty reduction
   or alleviation is not the sole objective of
   social policy, and (b) measuring policy
   efficiency with the single criterion of poverty
   rates change, aside from an inadequate could turn
   to be a misleading exercise.
2. This said, pensions, absorbing the lions share
   of social cash expenditure, are the main
   contributor to the reduction of both pre-fiscal
   poverty rates and poverty depth in Greece. Social
   (cash) benefits are of greater advantage to the
   households closer to the poverty threshold,
   indicating a possible creaming effect.
3. Although the distribution of pensions is by far
   the major determinant of poverty reduction for
   the non-working age families, the inequality of
   poverty gap is enhanced, indicating the
   particular distortions of the pension system,
   especially for low-income households.

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1. Pensions are also the major determinant of
   poverty reduction for the working age families.
   Pensioners comprise 1/3 of members of full- and
   mixed-employment working-age families and 2/3 of
   members of workless households, which surpass the
   poverty threshold after the distribution of
   pensions.
2. Creaming effects of cash benefits are
   particularly noticeable in full- and
   mixed-employment households.
3. Eliminating the current poverty gap would require
   financial resources equivalent to 4,2 of
   national disposable income, of which non-working
   age families would absorb 0.9, full-employment
   households 0.8, mixed-employment families 2.0
   and workless households 0.6. This amount, 4,2
   of national income, corresponds to 8.8 of the
   disposable income of the wealthier quartile (25)
   of the population or 50,3 of the total social
   expenditure that benefits this group.

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• It would be only a slight exaggeration to
  conclude that anti-poverty policy in Greece is
• virtually lacking and social policy objectives
  are way off reducing or alleviating poverty,
• at the same time as modernization processes
  transform rapidly the patterns of social needs,
  the founding principles, standards and practices
  of social policy have remained at a standstill,
  upholding the corporatist-clientelistic character
  of the welfare system.
• This is the main argument of the next section.
• To clarify this argument, however, we have to
  leave the magnificent world of economics and
  enter the wonderful world of political economy
  and sociology.

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• 3. Modernization Processes and the Contradictions
  of Social Policy in Contemporary Greece
• Considering Social Policy
• Social Policy should not be equated to the
  welfare state, that is something other than
  whatever menu of social benefits a state
  happens to offer. (The Romans or the medieval
  guilds and nobility).
• T.H. Marshall (1950) The post-war welfare state
  implied the recognition of citizens social
  rights and a promise to bridge the divisions of
  class, a rewritten social contract.
• Underlying the distinction of the state and the
  individual, there is a fundamental relation of
  mutual creation.
• Consider social policy as a bridge the
  functions of which are twofold to allow both for
  the articulation and the resolution of conflict,
  thereby providing a continuous link between the
  individual and the state.
• The famous Lockwoods (1964) distinction between
  social integration ( the bridge) and system
  integration.

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• The structural design and the architecture of
  this bridge, namely the particular ways in which
  welfare is produced and allocated between state,
  market and family, varies significantly between
  different countries.
• Welfare Regimes (Esping-Andersen) Modern welfare
  states can be classified in different clusters,
  according to the historical establishment and
  development of their social policies and the
  consequent implications to the broader social
  structure.
• the liberal welfare regime (Anglo-Saxon world)
• the social-democratic regime-cluster (Nordic)
• the conservative-corporatist regime
  (Continental and Southern Europe)
• Features of the Conservative-Corporatist Welfare
  Regime
• Sustain traditional society and integrate the
  individual into an organic entity, protected from
  the individualization and competitiveness of the
  market and removed from the logic of class
  opposition.
• Soon became a dogma of the Catholic Church.
  Corporatism inserted itself easily into
  Catholicisms subsidiarity principle the idea
  that the state should only intervene when the
  familys capacity for mutual protection was
  rendered impossible.

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• Whether it is strict hierarchy, corporatism or
  familialism, traditional status relations must
  be retained for the sake of social integration.
• The unifying principles of corporatism are a
  fraternity based on status identity, obligatory
  and exclusive membership, mutualism and monopoly
  of representation.
• Carried over into modern capitalism, corporatism
  was typically built around occupational groupings
  (e.g civil servants) seeking to uphold
  traditionally recognised status distinctions and
  used these as the organizational nexus for
  society and economy.
• The tradition of constructing a myriad of
  status-differentiated social insurance schemes,
  each with its peculiar rules, finances, and
  benefit structure, each tailored to exhibit its
  clienteles relative status position.
• International corporative leaders Greece with
  almost 250 (around 370 in early 1990s) and Italy
  with more than 120 distinct pension funds

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• Familialism and Corporatism in Modern Greece
• An essential feature in setting up the state in
  modern Greece (early 19th century) was the rapid
  development of an extended institutional system
  with typological modern civic properties.
• Economy and society, however, was typified by a
  rather atrophic array of modern economic
  relations.
• State policies are associated to the creation,
  promotion and expansion of a compilation of
  out-of-the-market incomes and rents, allocated
  to a number of specific social groups.
• This selective economic insurance policy, could
  be conceived as a function of a broader political
  strategy aiming at the selective and systematic
  formation of a wide supporting-class, typical
  in the conservative-corporatist welfare regime.

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• Dominant pattern of Social Reproduction
• Particular modes of condensation between
  enterprise and household in the context of the
  broader family network.
• Main components
• a wide-ranging network of small-scale property
• the domination of the micro-enterprise
• the self-employment of the head of the family
  (male breadwinner), and
• the unpaid labour of family members
• Stylized Facts (2003)
• 96.1 of enterprises in Greece employ less than
  4 persons (owner included) and 2 employ 5-9
  persons. Micro-enterprises account for 63 of
  total employment, while enterprises with more
  than 50 persons employed account for around 11
  of total employment. Dependent employment
  (employees) in micro-enterprises accounts for
  only 38.7 of total employment.
• The stability of this type of social formation
  has been founded on the potential of the family
  units to internalise social risks.

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• The unprecedented stability of small-scale family
  ownership in Greece, closely related to its
  demographic stability that is powerless to
  confront, was stemming from the capability of the
  over-manned household to channel a considerable
  part of the redundant human force out of the
  family venture.
• The main responses to market pressures and hence
  the material basis to deal with social shocks
  (crisis absorption capability) has always been
  (a) migration and (b) public employment, but with
  a distinctive feature the prospect for social
  advancement.
• This absorption capability of social shocks is
  related to the multi-functional attributes of the
  Greek family
• unit of consumption, reproduction of labour power
  and domestic regulation (typical)
• promotion of the individuals social mobility
  through an unparalleled family investment to
  education (key)
• seeking of economic insurance through the
  acquisition of a privately owned dwelling.

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• Aspects of modernization The hidden labour
  market mobility.

But this jobless growth picture may be
misleading since
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• Dividing the labour market in a primary and a
  secondary segment, according to the educational
  level of the different occupations
• immigrants join exclusively the secondary labour
  market,
• almost all Greek men employees flow into the
  primary segment, but
• half of Greek women employees enter the secondary
  section of the labour market
• However, the primary labour market, as defined
  above, does not necessarily indicates high
  quality in work (e.g. public sector temporary
  employees).
• Wages and Poverty
• Real labour cost proliferated in branches of
  economic activity closely related to the primary
  labour market (public sector enterprises and high
  level services of the private sector), while
• Labour cost in the secondary sector of the
  economy has been characterized by stagnant or
  declining trends.

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• The average annual labour cost of typical primary
  sector industries (energy, financial
  institutions, etc.) is 70 higher than the
  average labour cost for total economy, while the
  same indicator for the typical secondary sector
  activities (construction, trade, hotels,
  restaurants, etc.) is 25 to 35 lower.
• 52 of poor employees are also low-wagers (37 in
  the EU-15).
• During the 1990s the poverty risk increased
  considerably for the employed in the secondary
  economic sectors (78 for manufacturing, 33
  for construction, 47 in hotels and
  restaurants), while
• it declined or remained unchanged in the main
  divisions of the primary sector such as the
  public service, the monopolistic sectors of
  public enterprises, education, health and the
  high level services of the private sector.

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• Early 1980s to Late 1990s From Bureaucratic
  Patronage to the Current Agrarian Exodus.
• A major feature of the aforementioned labour
  market flows, is that urbanization and the rush
  to cities and mostly Athens, is the other side of
  the rapid salarization of employment,
  especially for women.
• Rural Politics - 1980s
• Gross product was stagnating, competitiveness was
  rapidly deteriorating, exports were gradually
  shrinking, but incomes were on the rise.
• Between early 1980s and early 1990s the
  relative poverty risk of households with a farmer
  as a head, decreased from 1.71 to 1.32 (-23) in
  relation to the national average, while the
  contribution of these families to total poverty
  declined from 37.4 to 16.4 (-56).
• Common Agricultural Policy subsidies and
  especially its implementation generated in effect
  a powerful network of political and economic
  interests including farmers, manufacturers, state
  executives and employees and the governing party
  officers.

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• Agricultural cooperatives, were assigned with the
  task to put into operation the so-called social
  policy in support of the small-scale agrarian
  family holding, that is in simple words the
  payment of prices way off their financial
  capabilities, financed through the Agricultural
  Bank backed up by the state warranty.
• Unsurprisingly, the liabilities of cooperatives
  had been skyrocketed by mid-1980s, as were the
  political gains, since cooperatives were
  transformed in clientelistic centers.
• This social in-its-essence policy effectively
  minimized the potential social disturbances that
  would otherwise take place in a period with
  stagnant or negative growth rates of the real
  GDP.
• Transformation of traditional corporatism and
  clientelism to a bureaucratic patronage or a
  bureaucratic clientelism system the party acts
  a collective patron of its adherents who are
  systematically converted to a state clientele
  through a labyrinthine combination of the party
  and the state apparatuses.

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• This policy was ideologically legitimized through
  a type of agrarian populism a blend of
  anti-capitalism, anti-imperialism and
  anti-European notions and the demand for a
  permanent protection of the small-scale family
  property.
• The strategy was not limited either within the
  boundaries of farming sector or to residents of
  the agrarian areas
• In Greece, residents of urban areas own almost
  55 of the rented agricultural land.
• High rate of establishment of new micro-firms,
  promoted by subsidies and an incomes and tax
  policy that left intact revenues and windfall
  profits.
• Employment in the public sector expanded rapidly,
  more than doubling its share between 1970s and
  1980s.

It could well been argued that the major
strategic objective of state policies during the
1980s was to build and establish the clusters of
a new supporting class, the so-called new middle
classes.
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• Rural Politics - 1990s
• External and internal pressures imposed the
  abandonment of the agrarian-friendly policy.
• Generation of large-scale fissures within the
  respective corporatist networks (e.g. cotton
  farmers).
• From mid-1980s to mid-1990s employment in
  agriculture declined by 24 and the number of
  holdings dropped by 16.
• Agrarian exodus was mainly deriving from wives
  and family members ceasing to participate in the
  family farm, their employment in the farm
  declining by 29 and 35 respectively.
• From mid 1990s to date the share of employment
  in agriculture declined by another 35.
• In overall terms the share of employment in
  agriculture was over 30 in early 1980s, 23 in
  1990 and 14 in 2004, while the share of the
  female employment from over 45 in early 1980s
  fell to 29 in 1990 and 18 in 2004.
• The relative poverty risk of households with a
  farmer as a head, increased from 1.32 in 1994 to
  2.15 in 1999 (63), while the contribution of
  these families to total poverty increased from
  16.4 to 20.9 (27).

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• Social expenditure is rising but a welfare state
  is lacking.
• The renowned fragmentation of social policy is
  nothing but an aspect of the particular form
  corporatism and clientelism, which stigmatize the
  entire structure of welfare sectors, both
  pensions and other benefits (unemployment, family
  and children, etc,) generating islands of
  privilege in a sea of insufficient provision.
• Aspects of the mounting social fissures generated
  by modernization processes and the inability of
  social policy to fill the emerging gaps
• Demographic ageing.
• Further delay of family formation and rapid
  decline of fertility
• Decrease of three and two generations households
  indicating a possible reduction of family
  solidarity especially among the low-income
  clusters.
• Access to higher education and educational
  inequalities have been aggravating for low-income
  families.
• The capability of low-income young persons to
  acquire a dwelling has been rapidly
  deteriorating.

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Vertical and Horizontal Efficiency of Benefits
(other than pensions) Greece, 2003
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• The fragmentation of the Greek pension system
• A sectoral dimension a large number of pension
  funds by sector of employment or occupation.
  Even within funds, there are sharp differences on
  a sectoral basis regarding contributions or
  pension entitlements.
• A differentiation according to tier of
  protection, that translates to a system with
  three tiers of benefits consisting of a primary
  pension, a supplementary pension, and a
  separation payment. The three tiers are almost
  always in different accounts, in most cases even
  in different institutions.
• A cohort dimension, where fragmentation occurs
  even within occupational groups and pension
  funds Frequently, grand fathering rules,
  take-overs of providers and other legal changes
  have created a multitude of subdivisions among
  the insured population according to age or length
  of service.

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• General Conclusion
• The processes of economic modernization in Greece
  during the previous 15-20 years resulted in a
  considerable decline of both the marginal and
  the average capability of the Greek family to
  absorb the consequent social shocks.
• European conventions and broader macroeconomic
  conditions necessitate restrictive fiscal
  policies and low-level public deficits and debts,
  resulting in the declining capability of the
  state to absorb labour. On the other side,
  migration trends have been reversed.
• In effect, both of the traditional social
  pressure-releasing mechanisms have ceased to play
  their key-role in sustaining a major part of the
  social integration processes.
• While system restructuring is well under way,
  welfare state should be a key-actor for system
  integration. Nonetheless, although social
  expenditure has been, till recently, on the rise
  and matches or even outruns the European average,
  the founding principles, standards and practices
  of social policy lingers at the rear, upholding
  the corporatist-clientelistic character of the
  welfare system.